Boomerang effect makes difference on taxes

Many years ago there was a lighthearted movie called “The Russians are Coming”.

It detailed what effect the “invasion” of a crew from a Russian sub would have on a sleepy seaside town. It turned out all right at the end and provided some laughs.

Today there is another “invasion” and this time it is by college students otherwise known as “boomerang kids” returning to live with their parents. This time the kids are coming as a result of the harsh economic times we are living under. The results might not be very comical and can present some serious problems. A current report indicated as much as 85 percent of the recent graduates who are coming back home have not been able to get a job and can’t afford to live on their own. They might be coming back to save money to attend graduate school, or just taking a break.

If you are not in this situation yourself, you can just imagine the problems that may develop. Parents generally feel that they want to help out financially and by so doing might start to deplete their own resources.

The extra cost involved by taking in others, might interfere with their retirement plans. This should be carefully considered as experts agree this is not the best for all involved. The parents have a limited time period in the workforce and need to prepare for retirement — if not already retired. The returnee on the other hand, has a lifetime to earn an income and could afford to wait it out.

Some students have been offered lower-tier jobs but may feel it is below their educational qualifications and not take them. Counselors have suggested that these positions be taken as it shows an employer the willingness to work. When positions open up the chance for advancement might come as a result of the disposition to work in the least desirable job.

Others who have returned who are working should be asked to contribute something to help defray the increased family expenses. This “rent” even a minimal amount prepares the returnee for independent living and helps parents keep up with home finances.

This would not be considered taxable income as it is helping to support all of the occupants. The former student would then file his/her own tax return, reporting all of their income. In the event they have begun paying back the student loan they might have incurred, they are eligible to deduct the interest on the loan.

On the other hand, if the returnee has a gross income of under $3,700 and is supported more than 50 percent by the parents this qualifying relative may be claimed as a dependent on the parent’s tax return. Support is defined as the cost of food, lodging, medical expenses, transportation, recreation and similar expenses for necessities. The total amount of all other expenses including mortgage, utilities, repairs, insurance are tabulated along with the other items to arrive at total costs. This sum is then allocated by the total number of people living in the premises and the dependency can be determined.

There are benefits to be enjoyed by parents as well in this arrangement such as companionship, help around the house for aging or disabled persons and even transportation to name just a few. In many cases prior strained relationships can be repaired and a better quality of life for all can be realized.

Observation: Americans used to say, “Give me liberty.” Now they just leave off the last word.